Welcome to ‘Stock Teasers’, where we aim to provide investment research on a wide range of topics. In this edition, Cross-Border Stocks, we spotlight one Canadian stock and one US stock, regardless of sector or size. Let’s dive in!

Canadian Stock: goeasy Ltd. (GSY)

Goeasy Ltd. (GSY) provides non-prime leasing and lending services under the easyhome, easyfinancial, and LendCare brands to consumers in Canada. The company operates through two segments, Easyfinancial and Easyhome. GSY specializes in alternative lending and financial services, offering quick and convenient access to credit for individuals facing challenges in obtaining traditional loans.

In terms of its financials, analysts expect 19.5% and 17% sales and earnings growth in 2024, respectively. Profit margins are quite strong with a current net profit margin of 33.2% and nearly a 26% ROE. It is quite cheap with a valuation of 10.9X forward earnings and 2.0X forward sales.

GSY is a relatively under the radar mid cap (C$3.05 billion) Canadian name. GSY has been beating earnings nicely of late and offers attractive margins. Net income saw a steady increase in 2023 as the company’s margins improved on both a quarterly and yearly basis. Recent price appreciation paired with valuation decline makes GSY all the more compelling as it continues to grow, and the general outlook for financials gets better. The company offers both growth and income by also paying a 2.56% yield.

US Stock: Carvana Co. (CVNA)

Carvana Co. (CVNA) operates an e-commerce platform for buying and selling cars in the United States. CVNA offers a complete buying experience for customers from researching and identifying a vehicle to purchasing/financing and delivery.

CVNA has had significant momentum over the last year up 16x and recent quarterly earnings caused the stock to further jump. CVNA has an interesting story as at one point it was a highly touted ‘meme stock.’ Share prices touched $365 in 2021 before cratering to a single digit share price and almost going bankrupt about a year later. Debt has been the concern with net debt levels touching just over $8 billion in 2022. This has come down nicely, to $5.8 billion today, although still high. CVNA had nearly $11 billion in revenue in 2023 so the concern here is profitability.

Looking at its financials, we see price starting to breakout as fundamentals have improved significantly. Over the last two quarters CVNA has been able to achieve positive net income and EBITDA while also becoming EBIT positive in its most recent quarter. Consistency will be key for CVNA to live up to recent share price momentum, but fundamental improvements may indicate that the company could be more than just a ‘meme stock.’

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Employees, directors, officers, related companies, the i2i Fund and/or partners of 5i Research do have a financial or other interest in GSY at the time of publishing.